Business groups protest Calif. carbon market

Manufacturers, oil refiners testify

Dozens of people, some wearing red "Save Our Jobs" T-shirts, packed a public meeting on Thursday to testify that a key component of California's landmark greenhouse gas emissions law will impose enormous costs on them and consumers.

Manufacturers, oil refiners and others appeared before the California Air Resources Board to protest the state's pending cap-and-trade program for carbon emissions.

The program's fees amount to a $1 billion-a-year tax increase at a time when the state's economy is sputtering, they said.

"We are concerned that out-of-state refiners will have an unfair advantage because they are not being held responsible for their emissions," said Lisa Bowman, a Phillips 66 worker and member of United Steelworkers Local 675.

The California Chamber of Commerce and others wrote Gov. Jerry Brown urging him to halt the start of the program, which begins in earnest on Nov. 14 and is the central element of California's 2006 climate-change law, AB32.

A key issue for those opposed to the program is costs associated with the permits - called allowances - which the program will require businesses to buy, some at auction.

In general, cap-and-trade will place a limit, or cap, of the emissions of heat-trapping gases that are allowed from pollution producers like refineries and cement manufacturers.

The businesses will be required to buy these allowances from the state, with each permit allowing for a specified amount of greenhouse gases each year.

For the first two years of the program, businesses will receive 90 percent of their allowances for free, with the free amount and the cap declining over time.

The chamber and other businesses want the amount of free allowances increased to reduce the impact on their businesses in a struggling economy.

"The fact is that this auction represents a multi-billion dollar hidden tax that will harm California businesses and consumers by dramatically increasing energy costs at a time we can least afford it," the letter to the governor stated.

Business groups say the uncertainty about what costs associated with cap-and-trade will be in 2015 - when the number of free allowances are set to be reduced - are influencing investment decisions being made now.

They want assurance that those costs will be lowered by offering more free allowances.

"We need to send the message now ... that more allowances will be available to industry," said Dorothy Rothrock of the California Manufacturers and Technology Association.

"2015 is right around the corner and manufacturers are making plans this year for the next three-to-five years and capital investments may or may not happen in California based on the current regulations."

The board has designed the system to financially reward businesses that reduce emissions below their cap - meaning money could be made through cap and trade.

Companies that cut emissions and have extra allowances can then sell the permits in a marketplace; greenhouse gas emitters could purchase those allowances if they failed to cut emissions.

Polluters that reduce emissions could turn a profit if the market price for extra allowances rises above the initial cost of the permit.

"This system rewards those that are more efficient and allows those who can't or don't want to reduce their emissions too keep on operating and pass the cost of allowances on to their customers," Mary Nichols, the board's chairman, said.

A company can also meet up to 8 percent of its emissions reduction obligations by purchasing carbon "offsets," or investments in forestry or other projects that reduce greenhouse gases.

The program, the largest in the U.S., is modeled on similar programs in Europe, and designed to be able to link up with plans in other states and elsewhere to increase the size of its market for carbon allowance trading.

"(The board) has gone a long way to make these regulations as simple and palatable as possible," Nichols said. "At this point it's time for CMTA and WSPA and the chamber to join the many of hundreds of businesses that are investing in the fight against climate change instead of fighting AB32."